Naguait v. NLRC

8/21/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 269
564 SUPREME COURT REPORTS

ANNOTATED
Naguiat vs. National Labor Relations
Commission
*
G.R. No. 116123. March 13, 1997.
SERGIO F. NAGUIAT, doing business under the

name and style SERGIO F. NAGUIAT ENT.,
INC., & CLARK FIELD TAXI, INC., petitioners,
vs. NATIONAL LABOR RELATIONS
COMMISSION (THIRD DIVISION),
NATIONAL ORGANIZATION OF
WORKINGMEN and its members, LEONARDO
T. GALANG, et al., respondents.
Labor Law; Actions; Certiorari; In a petition for

certiorari filed pursuant to Rule 65 of the Rules of
Court, which is the only way a labor case may reach
the Supreme Court, the petitioner must clearly show
that the NLRC acted without or in excess of
jurisdiction or with grave abuse of discretion.—
Firmly, we reiterate the rule that in a petition for
certiorari filed pursuant to Rule 65 of the Rules of
Court, which is the only way a labor case may reach
the Supreme Court, the petitioner/s must clearly show
that the NLRC acted without or in excess of
jurisdiction or with grave abuse of discretion.
www.central.com.ph/sfsreader/session/000001740fd07c9ad98a08cc003600fb002c009e/t/?o=False 1/37
Same; Administrative Law; Findings of fact of

administrative agencies and quasi-judicial bodies,
which have acquired expertise because their
jurisdiction is confined to specific matters, are
generally accorded not only great respect but even
finality.—Long-standing and well-settled in
Philippine jurisprudence is the judicial dictum that
findings of fact of administrative agencies and quasi-
judicial bodies, which have acquired expertise because
their jurisdiction is confined to specific matters, are
generally accorded not only great respect but even
finality; and are binding upon this Court unless there
is a showing of grave abuse of discretion, or where it
is clearly shown
_______________
* THIRD DIVISION.
565
VOL. 269, MARCH 13, 1997 565
Naguiat vs. National Labor Relations Commission
that they were arrived at arbitrarily or in disregard of

the evidence on record.
Same; Evidence; Estoppel; A party is estopped
from questioning issues of alleged facts if he did not do
so when he had all the opportunity in the proceedings
below.—In their amended complaint before the
Regional Arbitration Branch in San Fernando,
Pampanga, herein private respondents set forth in
detail the work schedule and financial arrangement
they had with their employer. Therefrom they

inferred that their monthly take-home pay amounted
to not less than $240.00. Herein petitioners did not
bother to refute nor offer any evidence to controvert
said allegations. Remaining undisputed, the labor
arbiter adopted such facts in his decision. Petitioners
did not even appeal from the decision of the labor
arbiter nor manifest any error in his findings and
conclusions. Thus, petitioners are in estoppel for not
having questioned such facts when they had all
opportunity to do so. Private respondents, like
petitioners, are bound by the factual findings of
Respondent Commission.
Same; Same; Business Losses; Separation Pay;
Business losses or financial reverses, in order to
sustain retrenchment of personnel or closure of
business and warrant exemption from payment of
separation pay, must be proved with clear and
satisfactory evidence.— Petitioners also claim that the
closure of their taxi business was due to great
financial losses brought about by the eruption of Mt.
Pinatubo which made the roads practically
impassable to their taxicabs. Likewise well-settled is
the rule that business losses or financial reverses, in
order to sustain retrenchment of personnel or closure
of business and warrant exemption from payment of
separation pay, must be proved with clear and
satisfactory evidence. The records, however, are
devoid of such evidence.
Same; Parties; Estoppel; Where a party did not
assail the juridical personality of a labor
organization’s authority to represent the complainants
before the quasi-judicial bodies, he is estopped from
raising such question before the Supreme Court.—On
the question of NOWM’s authority to represent
private respondents, we hold petitioners in estoppel
for not having seasonably raised this issue before the

labor arbiter or the NLRC. NOWM was already a
party-litigant as the organization representing the
taxi driver-complainants before the labor arbiter. But
petitioners who were party-respondents in said
complaint did not assail the juridical personality of
NOWM and the validity of its representations in
behalf of the complaining taxi
566
566 SUPREME COURT REPORTS ANNOTATED
drivers before the quasi-judicial bodies. Therefore,

they are now estopped from raising such question
before this Court. In any event, petitioners
acknowledged before this Court that the taxi drivers
allegedly represented by NOWM, are themselves
parties in this case.
Same; Courts; Administrative Law; Judgments;
Decisions, however concisely written, must distinctly
and clearly set forth the facts and law upon which they
are based, a rule applicable as well to dispositions by
quasi-judicial and administrative bodies.—
Unfortunately, the NLRC did not discuss or give any
explanation for holding Naguiat Enterprises and its
officers jointly and severally liable in discharging
CFTI’s liability for payment of separation pay. We
again remind those concerned that decisions, however
concisely written, must distinctly and clearly set forth
the facts and law upon which they are based. This
rule applies as well to dispositions by quasi-judicial
and administrative bodies.
Same; Words and Phrases; “Labor-Only

Contracting” and “In-dependent Contractors,”
Explained.—We find no reason to make a contrary
finding. Labor-only contracting exists where: (1) the
person supplying workers to an employer does not
have substantial capital or investment in the form of
tools, equipment, machinery, and work premises,
among others; and (2) the workers recruited and
placed by such person are performing activities which
are directly related to the principal business of the
employer. Independent contractors, meanwhile, are
those who exercise independent employment,
contracting to do a piece of work according to their
own methods without being subject to control of their
employer except as to the result of their work.
Same; Same; Corporation Law; The President of a
corporation who actively manages the business falls
within the meaning of an “employer” as contemplated
by the Labor Code and may be held jointly and
severally liable for the obligations of the corporation to
its dismissed employees.—Sergio F. Naguiat,
admittedly, was the president of CFTI who actively
managed the business. Thus, applying the ruling in
A.C. Ransom, he falls within the meaning of an
“employer” as contemplated by the Labor Code, who
may be held jointly and severally liable for the
obligations of the corporation to its dismissed
employees.
567
VOL. 269, MARCH 13, 1997 567
Same; Same; Same; “Close Family Corporations”;

Stockholders who are actively engaged in the
management or operation of the business and affairs
of a close corporation shall be personally liable for
corporate torts unless the corporation has obtained
reasonably adequate liability insurance.—Moreover,
petitioners also conceded that both CFTI and Naguiat
Enterprises were “close family corporations” owned by
the Naguiat family. Section 100, paragraph 5, (under
Title XII on Close Corporations) of the Corporation
Code, states: “(5) To the extent that the stockholders
are actively engage(d) in the management or
operation of the business and affairs of a close
corporation, the stockholders shall be held to strict
fiduciary duties to each other and among themselves.
Said stockholders shall be personally liable for
corporate torts unless the corporation has obtained
reasonably adequate liability insurance.” (italics
supplied)
Same; Same; Same; Torts; Corporate Torts; Our
jurisprudence is wanting as to the definite scope of
“corporate tort.”—Our jurisprudence is wanting as to
the definite scope of “corporate tort.” Essentially,
“tort” consists in the violation of a right given or the
omission of a duty imposed by law. Simply stated, tort
is a breach of a legal duty. Article 283 of the Labor
Code mandates the employer to grant separation pay
to employees in case of closure or cessation of
operations of establishment or undertaking not due to
serious business losses or financial reverses, which is
the condition obtaining at bar. CFTI failed to comply
with this law-imposed duty or obligation.
Consequently, its stockholder who was actively
engaged in the management or operation of the
business should be held personally liable.
Due Process; A party who has availed of the

opportunity to present his position cannot claim to
have been denied due process.— Furthermore, Sergio
and Antolin Naguiat voluntarily submitted
themselves to the jurisdiction of the labor arbiter
when they, in their individual capacities, filed a
position paper together with CFTI, before the arbiter.
They cannot now claim to have been denied due
process since they availed of the opportunity to
present their positions.
SPECIAL CIVIL ACTION in the Supreme

Court. Certiorari.
The facts are stated in the opinion of the Court.
568

ANNOTATED
Commission
Villanueva, De Leon, Hipolito and Associates

Law Offices for petitioners.
PANGANIBAN, J.:
Are private respondent-employees of petitioner

Clark Field Taxi, Inc., who were separated from
service due to the closure of Clark Air Base,
entitled to separation pay and, if so, in what
amount? Are officers of corporations ipso facto
liable jointly and severally with the companies
they represent for the payment of separation
pay?
These questions are answered by the Court in

resolving this petition for certiorari under Rule
65 of the Rules of Court assailing the
Resolutions of the National 1 Labor Relations
Commission (Third 2 Division) promulgated 3
on
February 28, 1994, and May 31, 1994. The
February 28, 1994 Resolution
4
affirmed with
modifications the decision of Labor Arbiter Ariel
C. Santos in NLRC Case No. RAB-III-12-2477-
91. The second Resolution denied the motion for
reconsideration of herein petitioners.
The NLRC modified the decision of the labor
arbiter by granting separation pay to herein
individual respondents in the increased amount
of US$120.00 for every year of service or its peso
equivalent, and holding Sergio F. Naguiat
Enterprises, Inc., Sergio F. Naguiat and Antolin
T. Naguiat, jointly and severally liable with
Clark Field Taxi, Inc. (“CFTI”).
The Facts
The following facts are derived from the records

of the case:
_______________
1 Composed of Comm. Ireneo B. Bernardo, ponente, with

Comms. Lourdes C. Javier (presiding commissioner) and
Joaquin A. Tanodra, concurring.
2 Rollo, pp. 69-73.
3 Ibid., p. 82.
4 Promulgated on June 4, 1993; rollo, pp. 48-56.
569
VOL. 269, MARCH 13, 1997 569


Commission
Petitioner CFTI held a concessionaire’s contract

with the Army Air Force Exchange Services
(“AAFES”) for the operation of taxi services
within Clark Air Base. Sergio F. Naguiat was
CFTI’s president, while Antolin T. Naguiat was
its vicepresident. Like Sergio F. Naguiat
Enterprises, Incorporated (“Naguiat
Enterprises”), a trading firm, it was a family-
owned corporation.
Individual respondents were previously
employed by CFTI as taxicab drivers. During
their employment, they were required to pay a
daily “boundary fee” in the amount of US$26.50
for those working from 1:00 a.m. to 12:00 noon,
and US$27.00 for those working from 12:00 noon
to 12:00 midnight. All incidental expenses for
the maintenance of the vehicles they were
driving were accounted against them, including
gasoline expenses.
The drivers worked at least three to four
times a week, depending on the availability of
taxicabs. They earned not less than US$15.00
daily. In excess of that amount, however, they
were required to make cash deposits to the
company, which they could later withdraw every
fifteen days.
Due to the phase-out of the US military bases
in the Philippines, from which Clark Air Base
was not spared, the AAFES was dissolved, and
the services of individual respondents were
officially terminated on November 26, 1991.
The AAFES Taxi Drivers Association
(“drivers’ union”), through its local president,
Eduardo Castillo, and CFTI held negotiations as
regards separation benefits that should be

awarded in favor of the drivers. They arrived at
an agreement that the separated drivers will be
given P500.00 for every year of service as
severance pay. Most of the drivers accepted said
amount in December 1991 and January 1992.
However, individual respondents herein refused
to accept theirs.
Instead, after disaffiliating themselves from
the drivers’ union, individual respondents,
through the National Organization of
Workingmen (“NOWM”), a labor organization
which
570

ANNOTATED
Commission
5
they subsequently joined, filed a complaint
against “Sergio F. Naguiat doing business under
the name and style Sergio F. Naguiat
Enterprises, Inc., Army-Air Force Exchange
Services (AAFES) with Mark Hooper as Area
Service Manager, Pacific Region, and AAFES
Taxi Drivers Association with Eduardo Castillo
as President,” for payment of separation pay due
to termination/phase-out.
6
Said complaint was
later amended to include additional taxi drivers
who were similarly situated as complainants,
and CFTI with Antolin T. Naguiat as vice
president and general manager, as party
respondent.
In their complaint, herein private

respondents alleged that they were regular
employees of Naguiat Enterprises, although
their individual applications for employment
were approved by CFTI. They claimed to have
been assigned to Naguiat Enterprises after
having been hired by CFTI, and that the former
thence managed, controlled and supervised their
employment. They averred further that they
were entitled to separation pay based on their
latest daily earnings of US$15.00 for working
sixteen (16) days a month.
In their position paper submitted to the labor
arbiter, herein petitioners claimed that the
cessation of business of CFTI on November 26,
1991, was due to “great financial losses and lost
business opportunity” resulting from the phase-
out of Clark Air Base brought about by the Mt.
Pinatubo eruption and the expiration of the RP-
US military bases agreement. They admitted
that CFTI had agreed with the drivers’ union,
through its President Eduardo Castillo who
claimed to have had blanket authority to
negotiate with CFTI in behalf of union members,
to grant its taxi driver-employees separation pay
equivalent to P500.00 for every year of service.
The labor arbiter, finding the individual
complainants to be regular workers of CFTI,
ordered the latter to pay them P1,200.00 for
every year of service “for humanitarian
consideration,” setting aside the earlier
agreement between CFTI
_______________
5 Ibid., pp. 14-18.

6 Ibid., pp. 20-29.
571
VOL. 269, MARCH 13, 1997 571

Commission
and the drivers’ union of P500.00 for every year

of service. The labor arbiter rejected the
allegation of CFTI that it was forced to close
business due to “great financial losses and lost
business opportunity” since, at the time it ceased
operations, CFTI was profitably earning and the
cessation of its business was due to the untimely
closure of Clark Air Base. In not awarding
separation pay in accordance with the Labor
Code, the labor arbiter explained:
“To allow respondents exemption from its (sic)

obligation to pay separation pay would be inhuman to
complainants but to impose a monetary obligation to
an employer whose profitable business was abruptly
shot (sic) down by force7 majeure would be unfair and
unjust to say the least.”
and thus, simply awarded an amount for

“humanitarian con-sideration.”
Herein individual private respondents
appealed to the NLRC. In its Resolution, the
NLRC modified the decision of the labor arbiter
by granting separation pay to the private
respondents. The concluding paragraphs of the
NLRC Resolution read:
“The contention of complainant is partly correct. One-

half month salary should be US$120.00 but this
amount can not be paid to the complainant in U.S.
Dollar which is not the legal tender in the Philippines.
Paras, in commenting on Art. 1249 of the New Civil

Code, defines legal tender as ‘that which a debtor may
compel a creditor to accept in payment of the debt.
The complainants who are the creditors in this
instance can be compelled to accept the Philip-pine
peso which is the legal tender, in which case, the table
of conversion (exchange rate) at the time of payment
or satisfaction of the judgment should be used.
However, since the choice is left to the debtor,
(respondents) they may choose to pay in US dollar.’
(Phoenix Assurance Co. vs. Macondray & Co., Inc., L-
25048, May 13, 1975)
In discharging the above obligations, Sergio F.
Naguiat Enterprises, which is headed by Sergio F.
Naguiat and Antolin Naguiat, father and son at the
same time the President and Vice-President
_______________
7 Rollo, p. 56.
572

and General Manager, respectively, should be joined

as indispensable party whose liability8 is joint and
several. (Sec. 7, Rule 3, Rules of Court)”
As mentioned earlier, the motion for

reconsideration of herein petitioners was denied
by the NLRC. Hence, this petition with prayer
for issuance of a temporary restraining order.
Upon posting by the petitioners 9of a surety bond,
a temporary restraining order was issued by
this Court enjoining execution of the assailed

Resolutions.
Issues
The petitioners raise the following issues before

this Court for resolution:
“I. Whether or not public respondent NLRC

(3rd Div.) committed grave abuse of
discretion amounting to lack of
jurisdiction in issuing the appealed
resolution;
II. Whether or not Messrs. Teofilo Rafols
and Romeo N. Lopez could validly
represent herein private respondents;
and,
III. Whether or not the resolution issued10 by
public respondent is contrary to law.”
Petitioners also submit

11
two additional issues by
way of a supplement to their petition, to wit:
that Petitioners Sergio F. Naguiat and Antolin
Naguiat were denied due process; and that
petitioners were not furnished copies of private
respondents’ appeal to the NLRC. As to the
procedural lapse of insufficient copies of the
appeal, the proper forum before which
petitioners should have raised it is the NLRC.
They, however, failed to question this in their
motion for reconsideration. As a consequence,
they are deemed to have waived the same and
_______________
8 Rollo, pp. 72-73.

9 Rollo, pp. 131-132.
10 Ibid., p. 6.
11 Ibid., pp. 97-102.
573
VOL. 269, MARCH 13, 1997 573

Commission
voluntarily submitted themselves to the

jurisdiction of the appellate body.
Anent the first issue raised in their original
petition, petitioners contend that NLRC
committed grave abuse of discretion amounting
to lack or excess of jurisdiction in unilaterally
increasing the amount of severance pay granted
by the labor arbiter. They claim that this was
not supported by substantial evidence since it
was based simply on the self-serving allegation
of respondents that their monthly take-home
pay was not lower than $240.00.
On the second issue, petitioners aver that
NOWM cannot make legal representations in
behalf of individual respondents who should,
instead, be bound by the decision of the union
(AAFES Taxi Drivers Association) of which they
were members.
As to the third issue, petitioners incessantly
insist that Sergio F. Naguiat Enterprises, Inc. is
a separate and distinct juridical entity which
cannot be held jointly and severally liable for the
obligations of CFTI. And similarly, Sergio F.
Naguiat and Antolin Naguiat were merely
officers and stockholders of CFTI and, thus,
could not be held personally accountable for
corporate debts.
Lastly, Sergio and Antolin Naguiat assail the

Resolution of NLRC holding them solidarily
liable despite not having been impleaded as
parties to the complaint.
Individual respondents filed a comment
separate from that of NOWM. In sum, both aver
that petitioners had the opportunity but failed to
refute, the taxi drivers’ claim of having an
average monthly earning of $240.00; that
individual respondents became members of
NOWM after disaffiliating themselves from the
AAFES Taxi Drivers Association which, through
the manipulations of its President Eduardo
Castillo, unconscionably compromised their
separation pay; and that Naguiat Enterprises,
being their indirect employer, is solidarily liable
under the law for violation of the Labor Code, in
this case, for nonpayment of their separation
pay.
The Solicitor General unqualifiedly supports
the allegations of private respondents. In
addition, he submits that the
574

ANNOTATED
Commission
separate personalities of respondent

corporations and their officers should be
disregarded and considered one and the same as
these were used to perpetrate injustice to their
employees.
The Court’s Ruling
As will be discussed below, the petition is

partially meritorious.
First Issue: Amount of Separation Pay
Firmly, we reiterate the rule that in a petition

for certiorari filed pursuant to Rule 65 of the
Rules of Court, which is the only way a labor
case may reach the Supreme Court, the
petitioner/s must clearly show that the NLRC
acted without or in excess12 of jurisdiction or with
grave abuse of discretion.
Long-standing and well-settled in Philippine
jurisprudence is the judicial dictum that findings
of fact of administrative agencies and quasi-
judicial bodies, which have acquired expertise
because their jurisdiction is confined to specific
matters, are generally accorded not only great
respect but even finality; and are binding upon
this Court unless there is a showing of grave
abuse of discretion, or where it is clearly shown
that they were arrived at arbitrarily 13
or in
disregard of the evidence on record.
Nevertheless, this Court carefully perused the
records of the instant case if only to determine
whether public respondent committed grave
abuse of discretion, amounting to lack of
jurisdiction, in granting the clamor of private
respondents that their separation pay should be
based on the amount of $240.00, allegedly their
minimum monthly earnings as taxi drivers of
petitioners.
_______________
12 Bordeos, et al. vs. NLRC, et al., G.R. Nos. 115314-23,

Sep-tember 26, 1996.
13 Maya Farms Employees Organization vs. NLRC, 239
SCRA 508, December 28, 1994.
575
VOL. 269, MARCH 13, 1997 575

Commission
In their amended complaint before the Regional

Arbitration Branch in San Fernando,
Pampanga, herein private respondents set forth
in detail the work schedule and financial
arrangement they had with their employer.
Therefrom they inferred that their monthly
take-home pay amounted to not less than
$240.00. Herein petitioners did not bother to
refute nor offer any evidence to controvert said
allegations. Remaining undisputed, the labor
arbiter adopted such facts in his decision.
Petitioners did not even appeal from the decision
of the labor arbiter nor manifest any error in his
findings and conclusions. Thus, petitioners are
in estoppel for not having questioned such facts
when they had all opportunity to do so. Private
respondents, like petitioners, are bound by the
factual findings of Respondent Commission.
Petitioners also claim that the closure of their
taxi business was due to great financial losses
brought about by the eruption of Mt. Pinatubo
which made the roads practically impassable to
their taxicabs. Likewise well-settled is the rule
that business losses or financial reverses, in
order to sustain retrenchment of personnel or

closure of business and warrant exemption from
payment of separation pay, must 14be proved with
clear and satisfactory evidence. The records,
however, are devoid of such evidence.
The labor arbiter, as affirmed by NLRC,
correctly found that petitioners stopped their
taxi business within Clark Air Base because of
the phase-out of U.S. military presence thereat.
It was not due to any great financial loss
because petitioners’ taxi business was earning
profitably at the time of its closure.
With respect to the amount of separation pay
that should be granted, Article 283 of the Labor
Code provides:
“x x x In case of retrenchment to prevent losses and in

cases of closures or cessation of operations of
establishment or undertaking not due to serious
business losses or financial reverses, the separation
_______________
14 See Revidad vs. NLRC, 245 SCRA 356, June 27, 1995; St.
Gothard Disco Pub vs. NLRC, 218 SCRA 321, 334, February 1,
1993.
576

pay shall be equivalent to one (1) month pay or at

least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six
(6) months shall be considered one (1) whole year.”
Considering the above, we find that NLRC did

not commit grave abuse of discretion in ruling
that individual15
respondents were entitled to
separation pay in the amount $120.00 (one-half
of $240.00 monthly pay) or its peso equivalent
for every year of service.
Second Issue: NOWM’s Personality to

Represent Individual Respondents-
Employees
On the question of NOWM’s authority to

represent private respondents, we hold
petitioners in estoppel for not having seasonably
raised this issue before the labor arbiter or the
NLRC. NOWM was already a party-litigant as
the organization representing the taxi driver-
complainants before the labor arbiter. But
petitioners who were party-respondents in said
complaint did not assail the juridical personality
of NOWM and the validity of its representations
in behalf of the complaining taxi drivers before
the quasi-judicial bodies. Therefore, they are
now estopped from raising such question before
this Court. In any event, petitioners
acknowledged before this Court that the taxi
drivers allegedly represented 16by NOWM, are
themselves parties in this case.
Third Issue: Liability of Petitioner

Corporations and Their Respective Officers
The resolution of this issue involves another

factual finding that Naguiat Enterprises
actually managed, supervised and controlled
employment terms of the taxi drivers, making it
their indirect employer. As adverted to earlier,

factual find-
_______________
15 Mobil Employees Association vs. NLRC, 183 SCRA 737,

March 28, 1990; See Catatista vs. NLRC, 247 SCRA 46,
1995; Shoppers Gain Supermart vs. NLRC, G.R. No. 110731,
July 26, 1996.
16 Petition for Certiorari, p. 2; rollo, p. 3.
577
VOL. 269, MARCH 13, 1997 577

Commission
ings of quasi-judicial bodies are binding upon the

court in the absence of a showing of grave abuse
of discretion.
Unfortunately, the NLRC did not discuss or
give any explanation for holding Naguiat
Enterprises and its officers jointly and severally
liable in discharging CFTI’s liability for payment
of separation pay. We again remind those
concerned that decisions, however concisely
written, must distinctly and clearly set forth
17
the
facts and law upon which they are based. This
rule applies as well to dispositions by quasi-
judicial and administrative bodies.
Naguiat Enterprises Not Liable

In impleading Naguiat Enterprises as solidarily
liable for the obligations
18
of CFTI, respondents
rely on Articles 106,
_______________
17 Del Mundo vs. Court of Appeals, 240 SCRA 348,

January 20, 1995; Estoya vs. Abraham-Singson, 237 SCRA 1,
September 26, 1994.
18 “Art. 106. Contractor or subcontractor.—Whenever an
employer enters into a contract with another person for the
performance of the former’s work, the employees of the
contractor and of the latter’s subcontractor, if any, shall be
paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to
pay the wages of his employees in accordance with this Code,
the employer shall be jointly and severally liable with his
contractor or subcontractor to such employees to the extent
of the work performed under the contract, in the same
manner and extent that he is liable to employees directly
employed by him.
The Secretary of Labor may, by appropriate regulations,
restrict or prohibit the contracting out of labor to protect the
rights of workers established under this Code. In so
prohibiting or restricting, he may make appropriate
distinctions between labor-only contracting and job
contracting as well as differentiations within these types of
contracting and determine who among the parties involved
shall be considered as the employer for the purposes of this
Code, to prevent any violation or circumvention of any
provision of this Code.
578

ANNOTATED
Commission
19 20
107 and 109 of the Labor Code.
Based on factual submissions of the parties,

the labor arbiter, however, found that individual
respondents were regular employees of CFTI
who received wages on a boundary or
commission basis.
We find no reason to make a contrary finding.
Labor-only contracting exists where: (1) the
person supplying workers to an employer does
not have substantial capital or investment in the
form of tools, equipment, machinery, and work
premises, among others; and (2) the workers
recruited and placed by such person are
performing activities which are directly related21
to the principal business of the employer.
Independent contractors, meanwhile, are those
who exercise independent employment,
contracting to do a piece of work according to
their own methods without being subject to
control of their
_______________
There is ‘labor-only’ contracting where the person

supplying workers to an employer does not have substantial
capital or investment in the form of tools, equipment,
machineries, work premises, among others, and the workers
recruited and placed by such persons are performing
activities which are directly related to the principal business
of such employer. In such cases, the person or intermediary
shall be considered as merely an agent of the employer who
shall be responsible to the workers in the same manner and
extent as if the latter were directly employed by him.”
19 “Art. 107. Indirect employer.—The provisions of the
immediately preceding Article shall likewise apply to any
person, partnership, association or corporation which, not
being an employer, contracts with an independent contractor
for the performance of any work, task, job or project.”
20 “Art. 109. Solidary liability.—The provisions of existing

laws to the contrary notwithstanding, every employer or
indirect employer shall be held responsible with his
contractor or subcontractor for any violation of any provision
of this Code. For purposes of determining the extent of their
civil liability under this Chapter, they shall be considered as
direct employers.”
21 Neri vs. NLRC, 224 SCRA 717, July 23, 1993.
579
VOL. 269, MARCH 13, 1997 579

Commission
22
employer except as to the result of their work.
From the evidence proffered by both parties,
there is no substantial basis to hold that
Naguiat Enterprises is an indirect employer of
individual respondents much less a labor only
contractor. On the contrary, petitioners
submitted documents such as the drivers’ 23
applications for employment24 with CFTI, 25and
social security remittances and payroll of
Naguiat Enterprises showing that none of the
individual respondents were26
its employees.
Moreover, in the contract between CFTI and
AAFES, the former, as concessionaire, agreed to
purchase from AAFES for a certain amount
within a specified period a fleet of vehicles to be
“ke(pt) on the road” by CFTI, pursuant to their
concessionaire’s contract. This indicates that
CFTI became the owner of the taxicabs which
became the principal investment and asset of the
company.
Private respondents failed to substantiate

their claim that Naguiat Enterprises managed,
supervised and controlled their employment. It
appears that they were confused on the
personalities of Sergio F. Naguiat as an
individual who was the president of CFTI, and
Sergio F. Naguiat Enterprises, Inc., as a
separate corporate entity with a separate
business. They presumed that Sergio F. Naguiat,
who was 27
at the same time a stockholder and
director of Sergio F. Naguiat Enterprises, Inc.,
was managing and controlling the taxi business
on behalf of the latter. A closer scrutiny and
analysis of the records, however, evince the
truth of the matter: that Sergio F. Naguiat, in
supervising the taxi drivers and determining
their employment terms, was rather carrying
out his responsibilities as president of CFTI.
Hence, Naguiat Enterprises as
_______________
22 Villuga vs. NLRC, 225 SCRA 537, August 23, 1993.

23 Records, pp. 33-46.
24 Ibid., pp. 142-205.
25 Ibid., 206-230.
26 Annex “C” to Respondent CFTI’s (petitioner herein)
Appearance and Omnibus Motion; records, pp. 47-48.
27 Motion for Reconsideration, p. 6; rollo, p. 79.
580

ANNOTATED
Commission
a separate corporation does not appear to be

involved at all in the taxi business.
To illustrate further, we refer to the
testimony of a driver-claimant on cross
examination.
“Atty. Suarez
Is it not true that you applied not with
Sergio F. Naguiat but with Clark Field
Taxi?
Witness
I applied for (sic) Sergio F. Naguiat.
Atty. Suarez
Sergio F. Naguiat as an individual or the
corporation?
Witness
‘Sergio F. Naguiat na tao.’
Atty. Suarez
Who is Sergio F. Naguiat?
Witness
He is the one managing the Sergio F.
Naguiat Enterprises and he is the one
whom we believe as our employer.
Atty. Suarez
What is exactly the position of Sergio F.
Naguiat with the Sergio F. Naguiat
Enterprises?
Witness
He is the owner, sir.
Atty. Suarez
How about with Clark Field Taxi
Incorporated what is the position of Mr.
Naguiat?
Witness
What I know is that he is a concessionaire.
x x x x x x x x x
Atty. Suarez
But do you also know that Sergio F.
Naguiat is the President of Clark Field
Taxi, Incorporated?
Witness
Yes, sir.
Atty. Suarez
How about Mr. Antolin Naguiat what is his
role in the taxi services, the operation of the
Clark Field Taxi, Incorporated?
581
VOL. 269, MARCH 13, 1997 581

Commission
Witness
28
He is the vice president.”
And, although the witness insisted that Naguiat

Enterprises was his employer, he could not deny
that he received his29 salary from the office of
CFTI inside the base.
Another driver-claimant admitted, upon the
prodding of counsel for the corporations, that
Naguiat Enterprises was in the 30trading business
while CFTI was in taxi services.
31
31
In addition, the Constitution of CFTI-
AAFES Taxi Drivers Association which,
admittedly, was the union of individual
respondents while still working at Clark Air
Base, states that members thereof are the
employees of CFTI and “(f)or collective
bargaining purposes, the definite employer is the
Clark Field Taxi, Inc.”
From the foregoing, the ineludible conclusion
is that CFTI was the actual and direct employer
of individual respondents, and that Naguiat
Enterprises was neither their indirect employer
nor labor-only contractor. It was not involved at
all in the taxi business.
CFTI president solidarily liable

Petitioner-corporations would likewise want to
avoid the solidary liability of their officers. To
bolster their position, Sergio F. Naguiat and
Antolin T. Naguiat specifically aver that they
were denied due process since32 they were not
parties to the complaint below. In the broader
interest of justice, we, however, hold that Sergio
F. Naguiat, in his capacity as president of CFTI,
cannot be exonerated from joint and several
liability in the payment of separation pay to
individual respondents.
_______________
28 TSN, May 18, 1992, pp. 3-6.

29 Ibid., pp. 9-10.
30 TSN, May 29, 1992, pp. 8-9.
31 Records, pp. 235-246.
32 Rollo, p. 231.
582

ANNOTATED
Commission
33
A.C. Ransom Labor Union-CCLU vs. NLRC is
the case in point. A.C. Ransom Corporation was
a family corporation, the stockholders of which
were members of the Hernandez family. In 1973,
it filed an application for clearance to close or
cease operations, which was duly granted by the
Ministry of Labor and Employment, without
prejudice to the right of employees to seek
redress of grievance, if any. Backwages of 22
employees, who engaged in a strike prior to the
closure, were subsequently computed at
P164,984.00. Up to September 1976, the union
filed about ten (10) motions for execution against
the corporation, but none could be implemented,
presumably for failure to find leviable assets of
said corporation. In its last motion for execution,
the union asked that officers and agents of the
company be held personally liable for payment of
the backwages. This was granted by the labor
arbiter. In the corporation’s appeal to the NLRC,
one of the issues raised was: “Is the judgment
against a corporation to reinstate its dismissed
employees with backwages, enforceable against
its officer and agents, in their individual, private
and personal capacities, who were not parties in
the case where the judgment was rendered?”
The NLRC answered in the negative, on the
ground that officers of a corporation are not
liable personally for official acts unless they
exceeded the scope of their authority.
On certiorari, this Court reversed the NLRC
and upheld the labor arbiter. In imposing joint
and several liability upon the company

president, the Court, speaking through Mme.
Justice Ameurfina Melencio-Herrera,
ratiocinated this wise:
“(b) How can the foregoing (Articles 265 and

273 of the Labor Code) provisions be
implemented when the employer is a
corporation? The answer is found in
Article 212(c) of the Labor Code which
provides:
‘(c) ‘Employer’ includes any person acting in
the interest of an employer, directly or
indirectly. The term shall not include any
labor organization or any of its officers or
agents except when acting as employer.’
_______________
33 142 SCRA 269, June 10, 1986.
583
VOL. 269, MARCH 13, 1997 583

Commission
The foregoing was culled from Section 2 of RA 602,

the Minimum Wage Law. Since RANSOM is an
artificial person, it must have an officer who can be
presumed to be the employer, being the ‘person acting
in the interest of (the) employer’ RANSOM. The
corporation, only in the technical sense, is the
employer.
The responsible officer of an employer corporation
can be held personally, not to say even criminally,
liable for nonpayment of back wages. That is the

policy of the law. x x x
(c) If the policy of the law were otherwise, the

corporation employer can have devious ways
for evading payment of back wages. x x x
(d) The record does not clearly identify ‘the officer
or officers’ of RANSOM directly responsible for
failure to pay the back wages of the 22
strikers. In the absence of definite proof in that
regard, we believe it should be presumed that
the responsible officer is the President of the
corporation who can be deemed the chief
operation officer thereof. Thus, in RA 602,
criminal responsibility is with the ‘Manager or
in his default, the person acting as such.’ In
RANSOM, the President appears to be the
Manager.” (Italics supplied.)
Sergio F. Naguiat, admittedly, was the president

of CFTI who actively managed the business.
Thus, applying the ruling in A.C. Ransom, he
falls within the meaning of an “employer” as
contemplated by the Labor Code, who may be
held jointly and severally liable for the
obligations of the corporation to its dismissed
employees.
Moreover, petitioners also conceded that both
CFTI and Naguiat 34 Enterprises were “close
family corporations” owned by the Naguiat
family. Section 100, paragraph 5, (under Title
XII on Close Corporations) of the Corporation
Code, states:
“(5) To the extent that the stockholders are actively

engage(d) in the management or operation of the
business and affairs of a close corporation, the
stockholders shall be held to strict fiduciary duties to
each other and among themselves. Said stockholders

shall be personally liable for corporate torts unless the
corporation has obtained reasonably adequate liability
insurance.” (italics supplied)
_______________
34 Motion for Reconsideration, p. 4; records, p. 436.
584

ANNOTATED
Commission
Nothing in the records show whether CFTI

obtained “reasonably adequate liability
insurance”; thus, what remains is to determine
whether there was corporate tort.
Our jurisprudence is wanting as to the
definite scope of “corporate tort.” Essentially,
“tort” consists in the violation of a right35given or
the omission of a duty imposed by law. 36 Simply
stated, tort is a breach of a legal duty. Article
283 of the Labor Code mandates the employer to
grant separation pay to employees in case of
closure or cessation of operations of
establishment or undertaking not due to serious
business losses or financial reverses, which is
the condition obtaining at bar. CFTI failed to
comply with this law-imposed duty or obligation.
Consequently, its stockholder who was actively
engaged in the management or operation of the
business should be held personally liable.
Furthermore,
37
in MAM Realty Development vs.
NLRC, the Court recognized that a director or
officer may still be held solidarily liable with a

corporation by specific provision of law. Thus:
“x x x A corporation, being a juridical entity, may act

only through its directors, officers and employees.
Obligations incurred by them, acting as such
corporate agents, are not theirs but the direct
accountabilities of the corporation they represent.
True, solidary liabilities may at times be incurred but
only when exceptional circumstances warrant such as,
generally, in the following cases:
x x x x x x x x x
4. When a director, trustee or officer is made, by specific
provision of law, personally liable for his corporate action.”
(footnotes omitted)
As pointed out earlier, the fifth paragraph of

Section 100 of the Corporation Code specifically
imposes personal liability upon the stockholder
actively managing or operating the business and
affairs of the close corporation.
_______________
35 Words and Phrases, Permanent Edition, Vol. 41A, p.

503.
36 Ibid., Bouvier’s Law Dictionary, Third Revision, Vol. 2.
37 244 SCRA 797, 802-803, June 2, 1995.
585
VOL. 269, MARCH 13, 1997 585

Commission
In fact, in posting the surety bond required by

this Court for the issuance of a temporary
restraining order enjoining the execution of the
assailed NLRC Resolutions, only Sergio F.
Naguiat, in his individual and personal capacity,
principally bound himself to comply with the
obligation thereunder, i.e., “to guarantee the
payment to private respondents of any damages
which they may incur by reason of the issuance
of a temporary restraining order sought, if it
should be finally adjudged 38
that said principals
were not entitled thereto.”
The Court here finds no application to the
rule that a corporate officer cannot be held
solidarily liable with a corporation in the
absence of evidence39 that he had acted in bad
faith or with malice. In the present case, Sergio
Naguiat is held solidarily liable for corporate
tort because he had actively engaged in the
management and operation of CFTI, a close
corporation.
Antolin Naguiat not personally liable

Antolin T. Naguiat was the vice president of the
CFTI. Although he carried the title of “general
manager” as well, it had not been shown that he
had acted in such capacity. Furthermore, no
evidence on the extent of his participation in the
management or operation of the business was
proferred. In this light, he cannot be held
solidarily liable for the obligations of CFTI and
Sergio Naguiat to the private respondents.
Fourth Issue: No Denial of Due Process
Lastly, in petitioners’ Supplement to their

original petition, they assail the NLRC
Resolution holding Sergio F. Naguiat and

Antolin T. Naguiat jointly and severally liable
with petitioner-corporations in the payment of
separation pay, aver-
_______________
38 Surety bond; rollo, p. 105.

39 See, Sunio vs. NLRC, 127 SCRA 390, January 31, 1984;
and General Bank and Trust Co. vs. Court of Appeals, 135
SCRA 569, April 9, 1985.
586

ANNOTATED
Commission
ring denial of due process since the individual

Naguiats were not impleaded as parties to the
complaint.
We advert to the case of A.C. Ransom once
more. The officers of the corporation were not
parties to the case when the judgment in favor of
the employees was rendered. The corporate
officers raised this issue when the labor arbiter
granted the motion of the employees to enforce
the judgment against them. In spite of this, the
Court held the corporation president solidarily
liable with the corporation.
Furthermore, Sergio and Antolin Naguiat
voluntarily submitted themselves to the
jurisdiction of the labor arbiter when they, in
their 40individual capacities, filed a position
paper together with CFTI, before the arbiter.
They cannot now claim to have been denied due

process since they availed of the opportunity to
present their positions.
WHEREFORE, the foregoing premises
considered, the petition is PARTLY GRANTED.
The assailed February 28, 1994 Resolution of the
NLRC is hereby MODIFIED as follows:
(1) Petitioner Clark Field Taxi,

Incorporated, and Sergio F. Naguiat,
president and co-owner thereof, are
ORDERED to pay, jointly and severally,
the individual respondents their
separation pay computed at US$120.00
for every year of service, or its peso
equivalent at the time of payment or
satisfaction of the judgment;
(2) Petitioner Sergio F. Naguiat Enterprises,
Incorporated, and Antolin T. Naguiat are
ABSOLVED from liability in the
payment of separation pay to individual
respondents.
SO ORDERED.
Narvasa (C.J., Chairman), Davide, Jr.,

Melo and Francisco, JJ., concur.
Petition partly granted, resolution modified.
Note.—A party is estopped to challenge the

personality of a corporation after having
acknowledged the same by enter-
_______________
40 Annex “C” to Petition; rollo, pp. 31-36.
587
VOL. 269, MARCH 13, 1997 587

People vs. Gayon
ing into a contract with it. (George Grotjahn

GMBH & Co. vs. Isnani, 235 SCRA 216 [1994])
——o0o——
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Naguait v. NLRC

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8/21/2020 SUPREME COURT REPORTS ANNOTATED VOLUME 269

564 SUPREME COURT REPORTS

SERGIO F. NAGUIAT, doing business under the

Labor Law; Actions; Certiorari; In a petition for

Same; Administrative Law; Findings of fact of

VOL. 269, MARCH 13, 1997 565

Naguiat vs. National Labor Relations Commission

that they were arrived at arbitrarily or in disregard of

they had with their employer. Therefrom they

for not having seasonably raised this issue before the

566 SUPREME COURT REPORTS ANNOTATED

Naguiat vs. National Labor Relations Commission

drivers before the quasi-judicial bodies. Therefore,

Same; Words and Phrases; “Labor-Only

VOL. 269, MARCH 13, 1997 567

Naguiat vs. National Labor Relations Commission

Same; Same; Same; “Close Family Corporations”;

Due Process; A party who has availed of the

SPECIAL CIVIL ACTION in the Supreme

The facts are stated in the opinion of the Court.

568 SUPREME COURT REPORTS

Villanueva, De Leon, Hipolito and Associates

Are private respondent-employees of petitioner

These questions are answered by the Court in

The following facts are derived from the records

1 Composed of Comm. Ireneo B. Bernardo, ponente, with

VOL. 269, MARCH 13, 1997 569

Naguiat vs. National Labor Relations

Petitioner CFTI held a concessionaire’s contract

regards separation benefits that should be

570 SUPREME COURT REPORTS

In their complaint, herein private

5 Ibid., pp. 14-18.

VOL. 269, MARCH 13, 1997 571

and the drivers’ union of P500.00 for every year

“To allow respondents exemption from its (sic)

and thus, simply awarded an amount for

“The contention of complainant is partly correct. One-

Paras, in commenting on Art. 1249 of the New Civil

572 SUPREME COURT REPORTS ANNOTATED

and General Manager, respectively, should be joined

As mentioned earlier, the motion for

this Court enjoining execution of the assailed

The petitioners raise the following issues before

“I. Whether or not public respondent NLRC

Petitioners also submit

8 Rollo, pp. 72-73.

VOL. 269, MARCH 13, 1997 573

voluntarily submitted themselves to the

Lastly, Sergio and Antolin Naguiat assail the

574 SUPREME COURT REPORTS

separate personalities of respondent

The Court’s Ruling

As will be discussed below, the petition is

First Issue: Amount of Separation Pay

Firmly, we reiterate the rule that in a petition

12 Bordeos, et al. vs. NLRC, et al., G.R. Nos. 115314-23,

VOL. 269, MARCH 13, 1997 575

In their amended complaint before the Regional

order to sustain retrenchment of personnel or

“x x x In case of retrenchment to prevent losses and in

576 SUPREME COURT REPORTS ANNOTATED

pay shall be equivalent to one (1) month pay or at

Considering the above, we find that NLRC did